Iran’s $10 Billion Power Move: The Trade Deal That will Defy the West and Redraw Asia’s Economic Map

After years of intensive negotiations, the heads of state of the Islamic Republic of Iran and the Islamic Republic of Pakistan have signed a historic Free Trade Agreement (FTA) aimed at boosting bilateral and regional economic cooperation. Signed in Islamabad in the presence of both presidents, this landmark deal promises to significantly transform trade and transit ties between Tehran and Islamabad, opening the door to expanded non-oil exports from Iran to South Asian markets.


Culmination of Years of Negotiations


Talks surrounding this agreement had been ongoing for several years, but customs disagreements, banking restrictions, and political considerations had long stalled its finalization. However, thanks to persistent diplomatic efforts and the prioritization of economic diplomacy as a key pillar of Iran’s foreign policy, the deal was finally concluded in 2025.

According to officials from both countries, the agreement marks a turning point in bilateral relations and could pave the way for deeper collaboration in energy, transit, and joint investments.

Aligned with Iran’s Regional Convergence Strategy

Since its inauguration, Iran’s Fourteenth Government has prioritized regional convergence as a core economic strategy within its foreign policy framework. In this context, the FTA with Pakistan represents a crucial milestone toward achieving this vision.


Following similar agreements with Eurasian and Persian Gulf countries, the deal illustrates Tehran’s commitment to expanding regional partnerships. It is a practical manifestation of the government’s foreign policy agenda centered on neighborhood integration—a strategy based on the principle that Iran’s security and economic prosperity depend on the creation of shared interests with its neighboring states. Pakistan, with its massive population and strategic location, occupies a special place in this strategy. The agreement sends a powerful message of cooperation to the region and sets a precedent for similar pacts in the future.


Unlocking Opportunities for the Private Sector


One of the most critical benefits of the FTA is the reduction or elimination of customs tariffs on hundreds of goods, opening up new opportunities for private-sector stakeholders in both countries.


The heart of this agreement lies in the economic potential it unleashes for the private sector. Lower tariffs mean reduced trade costs and improved product competitiveness. For Iran, this translates into a new export market for non-oil goods such as petrochemicals and agricultural products, while for Pakistan, it simplifies access to Iranian markets with products like textiles and rice. Additionally, the agreement facilitates joint investments—especially in border regions—helping to foster balanced and inclusive economic development.

Formal border markets such as Mirjaveh–Taftan and Mand–Pishin—three of six planned markets already operational—play a crucial role in easing transit routes and deepening cross-border economic connectivity.


Strengthening Iran’s Regional Economic Power


In recent years, Iran has sought to diversify its trade partnerships and reduce dependence on oil revenues. The FTA with Pakistan could boost Iran’s non-oil exports and strengthen its economic standing in South Asia.

With nearly 250 million people, Pakistan is one of the largest consumer markets in the world. Iran is now positioned to tap into this vast potential and significantly expand its share of regional trade. Estimates suggest that bilateral trade volume could exceed $10 billion within the next five years.

In the broader strategic landscape, this agreement is a pivotal step in strengthening Iran’s geo-economic positioning. By diversifying its trade partners and opening a new economic front in the East, Iran can deepen its influence across South Asia.
Increased non-oil exports to Pakistan will not only improve Iran’s trade balance but also enhance its economic resilience against external pressures. This kind of regional cooperation could also serve as a model for other ECO member states.


Expanding Transit Connectivity


A key dimension of the agreement is its potential to enhance transit connectivity between the two countries. Leveraging their strategic geographical locations, Iran and Pakistan can become a critical corridor for trade linking Central Asia, the Persian Gulf, and South Asia.


Projects such as the development of the Iran–Pakistan railway and the establishment of an energy corridor are expected to gain momentum under the FTA. The unique geographical complementarity between Iran and Pakistan gives them enormous potential to develop into a major regional transit hub.

The agreement incentivizes investment in infrastructure, including the expansion and integration of rail and road networks, and especially collaboration between Chabahar and Gwadar ports. These developments could transform the region into a central artery for global trade, generating long-term economic benefits and raising bilateral relations to a strategic level.

Conclusion

The signing of the Iran–Pakistan Free Trade Agreement marks a political and economic milestone, the result of years of intergovernmental negotiation and coordination. The agreement reflects the Fourteenth Government’s foreign policy emphasis on regional integration and economic diplomacy. By eliminating trade barriers, it creates fertile ground for boosting non-oil exports, attracting private sector investment, and enhancing transit connectivity between the two nations.


If post-signing measures are implemented swiftly and effectively, Iran can significantly enhance its economic influence in Asia and evolve into a key player in the regional supply and production network.



*Translated by Ashraf Hemmati from the original Persian article written by Mohammad Saleh Ghorbani